Minutes of the Tax Credits Consultation Group Meeting

MINUTES OF THE TAX CREDITS CONSULTATION GROUP MEETING

Held on Wednesday 13 July 2005 at 22 Kingsway, London WC2

ATTENDEES:

Representatives:

Liz Lathwood (CIOT)John Andrews (LITRG)

Beth Lakhani (CPAG)Robin Williamson (LITRG)

Kate Bell (One Parent Families)Anita Monteith (ICAEW)

Joyce Humphrey (TaxAid)Katie Lane (Citizens Advice)

Jane Hayball (LGA, Greenwich)John Wheatley (Citizens Advice)

Peter Gravestock (ATT)Andy Platt (NAWRA)

Pauline Hunter (Disability Alliance)

HMRC:

Nigel Jordan (Chairman), Paul Gray, Richard Summersgill, Chris Fox, Steve Murray, David Skinner, Vince Groome, Joanne Miller, Nita Hart, Mike Mather, Linda Lewis, Rob Parker (Job Shadower), Alison Dyer (Secretary).

DWP:

Roger Pugh.

Apologies for absence were received from Jane Moore (ICAEW).

1. WELCOME & INTRODUCTIONS

After those present had introduced themselves, Paul Gray (HMRC Deputy Chairman) said that, following some reallocation of portfolios within HMRC, he had recently taken over responsibility for tax credits from Dave Hartnett. He said he intended to attend meetings regularly.

Paul said that he was pleased to hear of the work done by the group and he wanted to build on that success. He felt there was scope for further improvement and was keen to use this forum, and others, to achieve better engagement, listening to representatives’ key messages, while being honest and frank.

One representative welcomed Paul and said there were three main areas of concern to representatives:

• In-year adjustments
• Fairness to claimants with disputed overpayments whose cases were dealt with before the streamlined procedures were introduced and whose overpayments were not written off which could be contrasted with those whose cases have been dealt with under the streamlined procedures
• There should be a right of appeal against the recovery of overpayments and better understanding as to why overpayments arise.

Nigel added that Caroline Rookes is HMRC’s new Director with responsibility for individuals.

Richard Summersgill said this was only his second week as Director of Child Benefit and Tax Credits Operations, but he was already impressed by the commitment of staff at the Tax Credit Office and was keen to get on top of the work there.

1. PAYMASTER GENERAL’S STATEMENT OF 26 MAY AND HMRC ACTIONS

Nigel Jordan explained that the Action Plan was a living document (outlining work HMRC are undertaking to address the measures announced by the Paymaster General on 26 May). One representative said active engagement with claimants was needed. Another representative referred to overpayments being a feature of the system and the Paymaster General saying the system was responsive. HMRC said they wanted to minimise overpayments, by better educating and informing claimants, helping them to manage their awards.

Another representative said that even if people report a change of circumstance, such as a change in income, say on receipt of a bonus, on the day that it happens, that change can lead to an overpayment because of the annual measure of income. Nigel said he would be looking at tax credits processes and this should lead to improvements in the customer experience and problems being alleviated. Representatives said they felt it was imperative that the position on income rises and overpayments be made clear to claimants. This point has been made many times previously.

Another representative said even employed people do not know their income for the future, so the system can lead to overpayments. He also said people will not report changes until the year end because of the effect of the 100% in-year adjustments. Nigel said the statistics published on 1 June gave details of overpayments for 2003-04, but further work is being done on the causes of overpayments. Representatives wanted this to be shared.

Representatives agreed that what was needed was a better breakdown of the types of circumstances that lead to overpayments and incentives to report changes . They felt people had low expectations of tax credits and understanding of what they will get. There were felt to be some disincentives for people to go back to work.

They also said things can go wrong when people report a change of circumstance and a better understanding of computer problems was needed. Claimants do not understand the annuality of the system, but do understand that if their income goes up, they can expect their tax credits to go down. They said there should be a limit on in-year recovery. HMRC said claimants who cannot manage with reduced payments can get additional payments if the reduction causes hardship. One representative commented that some people are excluded from receiving additional payments. HMRC said it would be helpful to know about claimants who have had problems getting additional payments. Representatives said they thought additional payments should be made automatically. HMRC said that new functionality introduced in April will enable additional payments to be system-generated and paid directly to claimants, but that claimants will need to request such payments.

Another representative asked if the poverty statistics include recovery of overpayments. HMRC said they thought these were normally a snapshot, but they would need to check how the statistics were compiled.

Post-meeting note: HMRC’s quarterly statistics show a snapshot of entitlement which means they do not show any reduction in payments to recover overpayments. So, for example, if someone entitled to the family element only had their award reduced to zero to recover an overpayment, they still show up in the statistics as being entitled to the family element. Child poverty figures are taken from the ONS Households Below Average Income (HBAI) publication. The HBAI is based on responses to the Family Resources Survey which enquires into families’ tax credits income.

Representatives felt there should be a working group on overpayments. HMRC agreed.

One representative said communications on overpayments was a problem and these should be improved. The subject could be linked with the better-off calculator.

One representative raised the matter of the new-style award notices. Whilst it was recognised that it is impossible to include everything on the four pages of the award notice, as the Ombudsman had said, people did need to be able to fully understand their award/entitlement. She wanted to emphasise the point, made at the award notice workshops, that HMRC must be able to provide a more detailed explanation of the award on request. The new-style award notice would not fulfil their promise if this was not available.

Other areas of concern for representatives included:

• Access to Helpline advisers on the progress of cases and whether correspondence is actively being worked on
• Disputed overpayment cases where claims for official error had been turned down before the introduction of the streamlined procedures – they said there were likely to be Judicial Reviews
• Availability of historical records of income and changes of circumstances
• Recognition that some people have health and literacy problems.

1. ACTION PLAN

Action area 1 – information provided for claimants

Representatives felt the detailed calculation currently provided is not helpful and does not show relevant periods. HMRC said it was a key task to deliver a better product. One representative asked if it would be possible to provide a manual breakdown. HMRC said that they produce manual calculations for cases that go to the Appeals Service, but this is resource-intensive work.

Another representative asked if Helpline advisers can print off calculations. HMRC said Helpline advisers just have sight of what is on the screen and switch from one screen to another during a call. One representative said she had prepared her own spreadsheet for detailed calculations and would be happy to share this. HMRC said they would check what Helpline advisers can see and do, with a view to improving the dialogue between callers and Helpline advisers.

Website

HMRC said the “landing page” was about to be changed. Frequently Asked Questions currently on the e-portal site will be included on the main site. These are also to be re-ordered and indexed, probably around the end of July. References to legislation and links to relevant websites are also to be made. Including consolidated legislation on the site will be a longer-term aim.

Pro-active contact

Nigel explained that HMRC are conducting a pilot, contacting claimants to check whether their circumstances or income have changed. The pilot involves sending letters to 15,000 claimants and contacting up to 15,000 claimants by telephone. Contacting people by SMS text messaging or e-mail was considered, but unsolicited contact is not allowed following an EU Directive and HMRC needs to allow customers to opt for this. HMRC said they are looking into the possibility of inviting people to provide their telephone number and e-mail addresses on new claims and renewals declarations and signal if they are content for HMRC to contact them by e-mail and SMS text messaging in connection with their tax credits award. HMRC said they would let the Group have a copy of the letter and call process. The first wave of outbound calling is due to be completed by the end of July. The overall exercise will not be completed until late 2006 although HMRC will be looking for early lessons from the first wave of activity.

Representatives made the point that with the current 100% recovery of overpayments in-year, there is no incentive to report non-mandatory changes of circumstances (which reduce entitlement) in-year. Claimants are better off if they wait until after the end of the tax year as they then benefit from the 10% or 25% recovery rates under the current Code of Practice 26. Concern was expressed that this pilot might be working to the detriment of claimants.

Award notices

HMRC said the issue of multiple notices no longer seems such a problem. However, following reports of a change of circumstance and income at the same time, separate revised award notices tend to be issued. HMRC said they are looking at this to see whether there was anything more that could be done to reduce the issue of unnecessary notices. However, everyone agreed that this was of a lower priority than some of the other issues raised.

Post-meeting note: HMRC have strengthened their guidance to Helpline advisers so that they handle multiple changes reported in one call in one transaction.

Communications

HMRC hope to recruit someone to look at communications with customers. He/she will review messages/forms/leaflets etc and their timing and whether they hit the right spot. One representative asked whether there had already been any research and, if so, whether it could be made public. HMRC said they would need to check what had been done.

Post-meeting note: Regular tracking research is carried out to measure awareness and understanding of tax credits communications. A review of tax credits communications is currently being planned.

Action area 2 – reminding claimants to provide up to date information/claimants most at risk of overpayments

HMRC said when people call the Tax Credits Helpline or the CTF Helpline, the advisers are asking them if they have received their renewals pack and advising them to renew their claims, if they have not already done so. One representative said some people who should have received their renewals packs by now had not. HMRC said less well-off people receive their packs first, but they can still report changes of circumstances if they have not received their pack. The issuing of packs has to be spread out to ensure the Helpline can handle the volume of calls thus prompted. However, HMRC are considering whether it might be possible to issue packs faster next year.

Another representative said children leaving full-time education is an obvious case where families are at risk of having an overpayment because once the claimant has notified that their young person is continuing in full-time education, the payments run on automatically until the young person is 19, whereas, in fact, most young people will finish their education before this date. HMRC said they will be sending letters to claimants with children aged over 16, 17 and 18, asking if their children are continuing in full-time education. They will let the group have a copy of the letter. HMRC said that, in the longer term, they are also looking at matching the data they have for Child Benefit with tax credits data and their aim is for just one notification to be needed. Another representative said she herself had received a letter about Child Benefit, but this does not mention tax credits. Representatives suggested that combining messages in the Child Benefit and tax credits letters would be valuable. HMRC said they would check what is said in the Child Benefit letter.

Action area 6 – Code of Practice 26

HMRC said they are reviewing Code of Practice 26 and wanted to consult on this

with representatives as much as possible. David Skinner said he would write to the Group to set up a working group on overpayments and Code of Practice 26, with a proposed agenda. He assured the group that their views are passed on to Ministers. Representatives were concerned about hardship and time limits for disputing overpayments.

Post meeting note: A meeting, attended by eight representatives, to discuss the review of Code of Practice 26 was held on 4 August.

They also asked if the streamlined procedures would be covered in the revised Code of Practice. HMRC said these procedures were introduced to help to clear the backlog of disputed overpayment cases, so it did not seem logical to include details.

HMRC said they were still considering the article CIOT had drafted on the streamlined procedures and apologised for the delay in providing a response.

Post meeting note: HMRC have now let CIOT have their comments on the article and it was published on the CIOT website on 22 July.

Representatives were concerned about those people whose disputed overpayments were dealt with before the streamlined procedures were introduced and whose cases were rejected. HMRC said these people have received their legitimate entitlement. Representatives felt everyone should be treated equally and HMRC’s decision not to apply the streamlined procedures to cases already considered and rejected before their introduction is contrary to natural justice.

HMRC said that they were planning to introduce a method to effectively suspend the recovery of an overpayment while the dispute was being resolved. One of the key issues being looked at was what messages would be shown on the award notices when recovery was suspended. It was possible that some messages would look a little odd until further changes could be made to the IT system. To avoid any confusion, claimants would receive a separate letter explaining what was going on.

DWP ISSUES

Better off calculations working group

Roger Pugh said he had now identified a contact in DWP to engage with on the calculator. He will also be contacting Jude Hillary (HMRC – Knowledge Analysis & Intelligence) and then setting up a meeting.

Disability Living Allowance

DWP send the Tax Credit Office notification of each award of DLA beginning or ceasing. TCO have a significant number of DLA cases on hand, about 26% of which affect the tax credits award amount. HMRC said they would consider their priorities for dealing with DLA cases. Representatives felt that these cases should receive high priority as the claimants affected were more likely to be in poverty.

National Insurance numbers (NINos)

Roger said the backlog of NINo interview cases fell, but had started to rise again. DWP are changing the way they deal with cases, so there should be an improvement in turnround. He will provide details of targets for dealing with applications.

Fast-track process

One representative asked about the role of DWP in helping people claim tax credits and the use of the e-portal. Roger said he would be interested to know where there are problems – details of any cases should be sent to the secretary. First, contact is made with the claimant by telephone when the operator takes details to populate a claim to then enable an appointment to be made for an interview at a Jobcentre Plus office. The claimant sees both a Personal Adviser and a Financial Assessor. Roger will check the time taken between the telephone call and the interview being held. He will also check that claims are being sent through the e-portal.

Post meeting note: Roger Pugh has provided further details of DWP’s role in a note to be circulated to the Group.

Pensioners claiming CTC

One representative said the support from the Pension Service for pensioners claiming CTC was not very good. Roger will look at this.